Question

reak-Even Sales and Sales Mix for a Service Company Northern Green Airways provides air transportation services between Seattle and San Diego. A single Seattle to San Diego round-trip flight has the following operating statistics: Fuel $10,490 Flight crew salaries 8,035 Airplane depreciation 3,795 Variable cost per passenger—business class 55 Variable cost per passenger—economy class 45 Round-trip ticket price—business class 555 Round-trip ticket price—economy class 265 It is assumed that the fuel, crew salaries, and airplane depreciation are fixed, regardless of the number of seats sold for the round-trip flight. a. Compute the break-even number of seats sold on a single round-trip flight for the overall product, E. Assume that the overall product is 10% business class and 90% economy class seats. Total number of seats at break-even seats b. How many business class and economy class seats would be sold at the break-even point? Business class seats at break-even seats Economy class seats at break-even seats

Answer 1

Ans) Let 'S' be the number of seats sold

a) 10490 + 8035 + 3795 = $22320 fixed cost per flight

$22320 + 55 (0.1) S + 45 (0.9) S = Total cost for s passengers on one flight

$22320 + 5.5 S + 40.5 S

$22320 + 46 S = Total cost for S passengers

555 (0.1) S + 265 (0.9) S = gross revenue from s passengers on 1 flight

55.5 S + 238.5 S = 294 S total gross revenue from "s" passengers on 1 flight

$22320 + 46 S = 294 S

22320 = 248 S

S = 90 Seats sold

b) 90 X 0.1 = 9 business seats at break-even point

90 X 0.9 = 81  economy seat at break-even point